Friday, December 21, 2007

Avian Securities is out with some interesting comments on Quantum (NYSE:QTM) saying their recent conversations have revealed two data points that have significant (positive and negative) ramifications for the stock:

1) They believe that Quantum is in the final stages of negotiating a reseller agreement with EMC for its DXi data deduplication products.

2) Expected general availability of Quantum’s DXi-7500 has been pushed out to at least calendar Q1.

While they view an EMC reseller agreement as a significant positive development, in their opinion the delay in the DXi-7500 roll-out puts Quantum’s estimates for its deduplication ramp (management had suggested its emerging technology segment could achieve $30M in sales in the March quarter) at risk. For the current quarter, Avian believes Quantum is tracking towards management guidance of $265M to $275M, though internal expectations of revenue growth in the teens appears unachievable at this point. They remain positive on Quantum given their view around the potential opportunity in data deduplication and continue to believe the Street is underestimating the value of this segment with Quantum having established itself as the 2nd player in this emerging market.

Notablecalls: Note that this is NOT a trading call. Avian has dug up some interesting datapoints and remains L-T positive on the name. DDUP is the pure-play in the deduplication space and QTM was never even considered a player until recently. That's the hidden value. Once they get it up to speed. Worth a further look. I'm sure Avian will tell us when the DXi-7500 product will start ramping. And I hope I won't miss that call!